‘A 1c/L January milk price rise would be fully justified’

Milk price increases continue to be justified, according to the IFA’s Sean O’Leary, and co-ops must deliver fully back to farmers what significantly stronger market returns allow.

O’Leary, the IFA National Dairy Committee Chairman said most co-ops will be meeting this week and next to examine milk prices payable for January.

“They must make sure the new increased 5.4% VAT rate benefits the farmers fully, and pass back a fully justified increase of at least 1c/l – more for the lower payers including Kerry – back to support their milk suppliers’ essential income recovery before peak.”

O’Leary also said that the latest GDT auction price increase came despite the slight easing in spots and futures.

This, he said, clearly showed that buyers were conscious of the rapidly falling global milk availability, while the EU average market returns for dairy products continued steady at high levels.

“This is because the global milk production scarcity which has been developing for months is now compounded by the Northern Hemisphere only starting to creep up towards peak, and Oceania’s output slowing down seasonally.

Meanwhile, EU market returns throughout December and January have exceeded 37c/l gross (equivalent to a farm gate price of 32c/l + VAT).

“Irish SMP prices have caught up with EU averages in January, with butter now even exceeding that figure,” he said.

O’Leary also said as December 2016 figures become available, it is very clear that, other than the US, all dairy regions are seeing production fall.

“In the EU, France is back an estimated 7%, the UK around 5%, Denmark also 5%, Italy 4.5%, Belgium 12% and Spain 2%.

New Zealand production is down 2.75% for December, while Australia’s is back 4.1%. Argentina’s December output is down by a whopping 19%.

“While December US production recorded a 2.4% increase, global milk availability is continuing to shrink rapidly,” he added.